It's likely that employee fraud will increase during a downturn. With the UK economy heading for a recession, employers should ensure they have procedures in place to handle fraud should it arise.
Q If an employee is suspected of fraud what initial steps should be taken?
A The first priority for the organisation should be to secure its assets and prevent any further losses. This may include suspending signing authorities or bank mandates. It will usually involve suspending the alleged wrongdoers while an investigation takes place. It is equally important to secure any evidence there may be.
Steps should be taken to suspend any routine destruction of documents and to retrieve and secure electronic data. In serious cases, forensic computer experts may be called in to ensure that electronic data is secured or retrieved safely. It may also be necessary to make insurance notifications and, where appropriate, to notify regulators or make a market announcement.
Q Should the employee always be suspended?
A If there are reasonable grounds to suspect that fraud has taken place then suspension will usually be the most appropriate course of action, subject to a contractual term permitting suspension. If there is a risk that the wrongdoing will continue if the suspect has access to computers or other records that may be altered or destroyed then suspension will be essential.
The employer will need to consider whether the investigation can realistically continue with the wrongdoer in the office. If the organisation fails to suspend an individual, it may be difficult to later argue that the employee's conduct was sufficiently serious to justify a dismissal for gross misconduct.
If the organisation is regulated by the Financial Services Authority (FSA) and there is concern that the individual is not behaving in a fit and proper manner then there will be an expectation from the FSA that the employee be suspended.
Q When should the police be brought in?
A An employer is under a duty to involve the police where there is a suspicion that money laundering has taken place. Otherwise, the employer has discretion over whether to report the crime. There may however be insurance or regulatory obligations that require any wrongdoing be reported.